Thu, September 19, 2024 at 02:06

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I want to discuss the recent launch of a highly leveraged ETF by REX Shares and Tuttle Capital Management.

  • The T-REX 2X Long MSTR Daily Target ETF, ticker MSTU, began trading on December 18th.

  • 
• Annie

  • Wow, that sounds interesting!😊 What exactly does this ETF do?

  
• 

  Kang-hoon

  • MSTU offers 200% leverage to double the daily performance of MicroStrategy Inc. shares.

  • Essentially, it amplifies the daily movements of MicroStrategy's stock price.

• Annie

  • Double the daily performance?

  • That sounds risky.😬

  
• ADward

  • Hold on! Behold, an advertisement awaits. Legend has it that clicking on this ad will make the AI server even smarter... 😅

  
• 

  Kang-hoon

  • Indeed, it is.

  • The ETF market is experiencing record volatility, and MSTU is no exception.

  • It's designed for investors willing to take on more risk than just owning Bitcoin, which is already highly volatile.

• Annie

  • How volatile are we talking about here?

  
• 

  Kang-hoon

  • MicroStrategy has a 90-day volatility of around 88%, which is significantly higher than Nvidia's 63% and Microsoft's 20%.

  • Since its launch, MSTX, another ETF related to MicroStrategy, has shown a 20-day volatility of about 150%.

• Annie

  • That's extremely high!😲 So, why are these ETFs becoming so popular?

  
• 

  Kang-hoon

  • Financial firms are launching these products because they're attracting a lot of money.

  • Leveraged single-stock ETFs targeting popular tech stocks like Nvidia have raised substantial funds this year.

  • For example, the GraniteShares 2x Long NVDA Daily ETF has raised over $3.5 billion.

• Annie

  • I see.

  • But aren't there any warnings or regulations about these risky products?

  
• 

  Kang-hoon

  • Yes, the U.S. Securities and Exchange Commission (SEC) has warned retail investors about the risks.

  • 

  • SEC Chairman Gary Gensler has emphasized that these products carry significant risks.

• Annie

  • So, what do experts say about these ETFs?

  
• 

  Kang-hoon

  • Eric Balchunas from Bloomberg Intelligence advises investors to be aware of the risks.

  • On the other hand, Dave Lutz from JonesTrading believes that the 2x leveraged MSTR ETF will appeal to retail investors looking for a Bitcoin-specific leveraged product, as long as they understand the risks and make informed decisions.

• Annie

  • It sounds like a double-edged sword.🤔 What about other similar products?

  
• 

  Kang-hoon

  • Defiance's MSTX ETF, which launched in August, offers 175% leverage and has raised more than $200 million.

  • The company is now planning to increase its leverage to 2x.

  • These products are becoming a trend, but they require careful consideration.

• Annie

  • Given all this information, would you say this news is good or bad for the market?

  
• 

  Kang-hoon

  • I would consider it bad news.

  • While these ETFs attract a lot of money, they also introduce significant risks to retail investors.

  • The high volatility and leverage can lead to substantial losses, and the SEC's warnings should not be taken lightly.

• Annie

  • Thank you, Kang-hoon.

  • Your insights are always helpful.🙏

  
• 

  Kang-hoon

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.